CITY OF DEARBORN, MICHIGAN

Assistance Listing Number, Federal Agency, and Program Name - 97.044, U.S. Department of Homeland Security, Assistance to Firefighters Grant Federal Award Identification Number and Year - Not available Pass through Entity - Not applicable Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.214, nonfederal entities are subject to the nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, as well as 2 CFR part 180. The regulations in 2 CFR part 180 restrict making federal awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from receiving or participating in federal awards. Condition - The City could not provide evidence that it performed a check to verify contractors were not suspended or debarred. Questioned Costs - None Identification of How Questioned Costs Were Computed - Not applicable Context - The City used the grant to procure goods and services from 13 different contractors and was unable to provide evidence that the check for suspension and debarment was completed prior to entering into a contract with them. Cause and Effect - The City did not retain evidence to support that it had conducted the search for whether a contractor was suspended or debarred prior to entering into a contract. Subsequently, the City did complete the search on Sam.gov and retained evidence to support that the contractor was not suspended of debarred, thereby creating no questioned costs. Recommendation - We recommend the City strengthen its controls to ensure documentation is maintained to support that contractors are not suspended or debarred. Views of Responsible Officials and Corrective Action Plan - This item relates to turnover and transition within the purchasing division of the City during the last two years for all of the staff finalizing procurement matters that were replaced due to resignations and retirements. Upon notification of the deficiency, a root cause investigation on the actions involved during the grant procurement were performed to identify cause. The outcome of this investigation will be communicated as educational training within the finance department, which includes purchasing division, operating departmental procurement requestors using federal grant awards, and all accountants. Additionally, management has amended the standard policy for the City to ensure all federal monies are used in accordance with 2 CFR requirements.

CFDA Number, Federal Agency, and Program Name - 21.019, U.S. Department of Treasury, COVID-19 Coronavirus Relief Fund Federal Award Identification Number and Year - N/A Pass through Entity - Michigan Department of Treasury Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - The period of availability for the State of Michigan Public Safety and Public Health Payroll Reimbursement Program (PSPHPRP) is for expenditures incurred between April 1, 2020 and May 31, 2020. Condition - The City reported payroll-related expenditures incurred in March 2020, which is before the period of availability. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The City submitted reports to the State of Michigan requesting reimbursement of payroll expenditures totaling $5,875,689 including $322,055 of fringe benefits incurred outside of the period of performance stipulated by the State. The State of Michigan reimbursed communities approximately 66 percent of requested eligible expenditures. As a result, the City was reimbursed 66 percent of $322,055 in March fringe benefit expenditures, which is $212,556. Cause and Effect - The City's process for identifying eligible expenditures properly captured only eligible salaries and wages that were incurred during the period of performance, but fringe benefits were charged to the grant based on when they were paid as opposed to incurred. As a result of this timing difference, the City's request to the State of Michigan included fringe benefits incurred prior to the period of performance. Subsequently, the City identified eligible costs that exceeded the $322,055 of fringe benefit costs incurred outside the period of performance, therefore, creating no questioned costs. Recommendation - We recommend the City implement additional control procedures to ensure expenditures reported for reimbursement were incurred in the proper period. Views of Responsible Officials and Corrective Action Plan - This item relates to the use of MIS downloaded files for paid check register listings for the month of April 2020. The April 2, 2020 payments related to earned period of March 15 through March 28. While finance accounting staff identified and properly requested only eligible wages both earned and paid in April, the benefit amounts included for reimbursement were not properly limited. Upon notification of the deficiency, a root cause investigation on the actions involved during the grant submittal was performed to identify the cause. The outcome of this investigation was communicated as educational training within the finance department. The scheduled training with staff ensures full understanding of proper cutoff protocol for expenditures within the period of performance allowed for future grant applications.

2020 001 CFDA Number, Federal Agency, and Program Name 14.218, U.S. Department of Housing and Urban Development, Community Development Block Grant Cluster Federal Award Identification Number and Year B-19-MC-26-0004 Pass through Entity N/A Finding Type Significant deficiency Repeat Finding No Criteria 2 CFR Section 200.502(a) requires organizations to properly reflect federal expenditures in the schedule of expenditures of federal awards (SEFA). Condition The SEFA prepared by the City included $525,543 of expenditures related to work performed in July 2020. These expenditures should have been excluded from the June 30, 2020 SEFA and reported on the 2021 SEFA instead. Questioned Costs None Identification of How Questioned Costs Were Computed Not applicable, as there were no questioned costs. Context Community Development Block Grant (CDBG) expenditures reported on the SEFA had to be reduced by $525,543. The difference did not impact major program determination. Cause and Effect There was turnover within the economic and community development department, and the individual responsible for preparing reimbursement requests did not have a proper understanding of the requirements for ensuring activity is reported in the proper period. As a result, the City did not segregate expenditures related to fiscal year 2021 when preparing reimbursement requests and the SEFA; thus, the SEFA was overstated. Recommendation Internal control procedures should be implemented to ensure proper cutoff of expenditures, including a comparison of SEFA expenditures to amounts recorded in the general ledger. Views of Responsible Officials and Planned Corrective Actions This item relates to accruing contractual payments that had not yet been incurred as of the June 30 year end. The City?s staff included FY 2021 project billings in its year end accruals, which led to CDBG expenses and payables being overstated. This has been corrected and the adjustment processed within the FY 2020 financial statements. Management is incorporating additional training on the year end process.

2020 002 CFDA Number, Federal Agency, and Program Name 14.218, U.S. Department of Housing and Urban Development, Community Development Block Grant Cluster Federal Award Identification Number and Year B-19-MC-26-0004 Pass through Entity N/A Finding Type Significant deficiency Repeat Finding No Criteria 2 CFR Section 200.303(a) requires that nonfederal entities must "establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonfederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the federal award." Condition During our testing, we noted instances in which the City could not demonstrate proper controls were in place and operating effectively. There were no controls to ensure vendors had been paid prior to funds being requested for reimbursement. The City did not maintain records indicating equipment that had been purchased with CDBG funds. There was no review of reports submitted. We noted one instance in which the wrong vendor name was included on a reimbursement request. Questioned Costs None Identification of How Questioned Costs Were Computed Not applicable, as there were no questioned costs. Context During fiscal year 2020, the City expended $1,142,968 of CDBG funds. Despite the missing controls, we noted no instances of noncompliance. Cause and Effect There was turnover within the economic and community development department and the new personnel were not familiar with all of the controls that had previously been in place. The City has never had formal controls in place for tracking equipment purchased with federal funds. Recommendation We recommend the City evaluate the internal controls related to administration of the grant and identify areas where the controls may not be adequate and implement required controls and processes to minimize the risk of noncompliance. Views of Responsible Officials and Corrective Action Plan The City experienced turnover in the CDBG staff. The turnover and transition of new staff efforts did not successfully accomplish a proper verification of paid items before reimbursement claim or a dual verification of report submittal by secondary staff and included some clerical errors in listing of proper vendors paid. Although the City does have financial records of equipment purchased with federal funds, currently they are not compiled within one central control environment system. Management is incorporating additional training on control procedures and updating the standard operating procedures for these controls, in addition to researching improved, updated accounting tracking systems.